What They Did with the Money

Americans had $6,510,000,000 more cash to spend or save in the first four months of 1942 than they had a year before. This is what they did with it:

> Put 38% of it ($2,850,000,000) into war bonds, compared with about $400,000,000 a year before.

> Paid out $2,600,000,000, for which they got nothing but inflation, in the form of 19% higher prices. Specifically, they paid $16,740,000,000 for goods that would have cost only $14,100,000,000 in 1941.

> Paid off more than $1,100,000,000 worth of old debts, mostly because they were running off anyway.

> Paid out $1,075,000,000 more in increased income taxes, and perhaps $280,000,000 more in Federal excise taxes.

These increases took almost $1,000,000,000 more than the total increase in their income. To make up the difference, they 1) went into savings for $200,000,000, 2) did less buying. Retail sales dropped 13% in terms of volume.

This was no buying spree. What, then, was all this talk that something had to be done to close an inflationary gap which Leon Henderson estimated at $17,000,000,000? Why must they save twice as much, be taxed twice as much to keep from blowing the price ceiling to smithereens?

Henderson's answer is simple. There will be 25% less goods available for civilians this year than last year, so a 13% cut in buying is not enough. The U.S. standard of living will have to be cut a lot more before the war is over.

But neither Henderson nor Franklin D. Roosevelt has faced the second answer. Fact is the war has given some groups far more buying power than they ever had before; other groups have had to cut way down. On balance there is a slight retrenchment; but no tax and savings plans are yet designed to make the new-rich stand their share of the needed extra cut.

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